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Question 6 (11 Marks) Hansen Corporation uses the perpetual inventory system and had the following information...

Question 6

Hansen Corporation uses the perpetual inventory system and had the following information available:

Units              Unit Cost                 Total Cost

Jan

1

Beginning inventory

15

$4.00

$ 60

20

Purchase

60

4.40

264

21

Sale

65

-

-

Jul

25

Purchase

30

4.20

126

Oct

20

Purchase

45

4.80

216

Nov

15

Sale

75

-

-

Instructions

Answer the following independent questions and show calculations supporting your answers:

a) Assume that the company uses the FIFO cost method. The cost of goods sold for the Jan 21 sale was $ ________

b) Assume that the company uses the average cost method. The cost of goods sold for the Jan 21 sale was $ _____________ (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)

c) Assume that the company uses the average cost method. The value of the inventory after the Nov 15 sale was $    _________________ . (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)

  d) Assume that the company uses the FIFO cost method. The value of the inventory after the Oct 20 purchase is $_____________ .

Homework Answers

Answer #1

a) COGS for the Jan 21 Sale (FIFO) = 15 units * $4 + 50 units * $4.40 = $280

b) COGS for the Jan 21 sale (Average Cost ) = Cost of units /No. of Units = (264+60)/75 = $4.32

$4.32*65 = $280.80

c) Cost of Inventroy after Nov 15 Sale ( Average cost ) = Number of Units left * Average Cost

(15+60-65+30+45-75) * 4.80 = $48

d) Value of Inventory after Oct 20 Purchase ( FIFO) =

Number of units left from Jan 20 lot after sale of Jan 21 = 10 units . Therefore Cost of these 10 units = 10*4.4 = $ 44

Cost of units from 25 july lot = 30*4.2 =$ 126

Cost of units from 20 oct lot = 45*4.8 = $ 216

Total Cost = 44+126+216 = $ 386

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